The allure of starting a business can be strong. In fact, 70 percent of people below 25 say that starting a company is their lifelong dream.
As an entrepreneur, you are in control of your own destiny. You make the decisions, and you reap the benefits. It can be monetarily rewarding and can be a means to financial freedom.
One of the secrets to starting a company and guiding it to success is finding the right location. Sometimes, that location is not in your home country. If you are considering starting a business outside of your country, Spain is an excellent choice.
But what makes Spain such a good place to set up a company? Who is allowed to start a business in the country? What are the steps for starting a business in Spain?
If you’re asking yourself any of these questions, this guide is for you. Keep reading to learn everything you need to know about doing business in one of Europe’s most vibrant economies.
Why Spain Is a Good Choice to Do Business?
As of 2020, approximately 3,366,570 companies existed in Spain. That number keeps growing, with tens of thousands of new businesses set up each year. But why are entrepreneurs to attracted to Spain?
1. The Spanish Economy Is Strong and Growing
In recent years, Spain’s economy has been growing steadily. In 2022, the country’s GDP is expected to expand by 4 percent. For entrepreneurs, this spells opportunity. A strong economy means that businesses are doing well, and consumers have more disposable income to spend on goods and services.
The Spanish economy is diversified and includes sectors such as tourism, agriculture, manufacturing, and finance. This diversity gives businesses in Spain a buffer against economic downturns in any one sector.
The fact that Spain has a population of almost 48 million as of 2022 is good news for entrepreneurs. A large population means there’s a big potential domestic customer base for businesses.
2. Spain Is an International Hub for Trade
Spain is home to several international organizations. The city of Madrid is home to the World Tourism Organization (WTO) and the Organisation for Economic Co-operation and Development (OECD). These organizations offer networking opportunities with other business leaders from around the world.
And if you’re looking for an opportunity to expand your business beyond Spain’s borders, you’ll find plenty of options here. The country has over 100 free trade agreements in place with countries all over the world. These agreements make it easier for businesses to export goods and services to Spain’s trading partners.
3. The Spanish Government is Pro-business
In Spain, the government offers a number of incentives and programs to help businesses get started and grow. For example, the Spanish government created a “one-stop shop” service called the Public Business Information Portal (PBIP). This portal provides entrepreneurs with access to all the information they need to start a business in Spain, including licenses, permits, and registration requirements. You can also find helpful information on acquiring a company in Spain.
There are also tax breaks and subsidies that help reduce business costs in Spain. These incentives are available to businesses in a wide range of sectors, including renewable energy, film production, and R&D.
In addition, the Spanish government offers a “golden visa” program for entrepreneurs who want to start a business in Spain. This program offers residency permits to non-EU citizens who invest €1 million or more in a Spanish company.
4. Spain Has a Large Talent Pool
One of the benefits of doing business in Spain is that the country has a highly educated workforce. According to recent estimates, 54 percent of women between 25 and 34 have tertiary education. 41 percent of their male peers have this qualification as well.
What’s more, Spain has a number of world-renowned universities, including the University of Barcelona, the Autonomous University of Madrid, and the Complutense University of Madrid. These universities produce graduates with the skills and knowledge that businesses need to succeed.
5. The Spanish Infrastructure is Well Developed
In Spain, you’ll find a well-developed infrastructure that includes a modern transportation network, reliable utilities, and high-speed internet. This infrastructure makes it easy for businesses to operate in Spain.
The Spanish transportation network includes both well-maintained roads and an extensive railway system. This network makes it easy to move goods and services around the country. Spain also has several seaports that are used for both domestic and international shipping. The country’s largest port, Valencia, is one of the busiest ports in Europe.
In addition, Spain has a reliable electricity grid. Blackouts can cause major disruptions and lead to untold losses for businesses. When you incorporate a business in Spain, experiencing frequent blackouts is one less worry you’ll have to deal with.
Finally, Spain has high-speed internet. In an era where more and more businesses are moving online, this is an important consideration, whether you’re buying a company in Spain or starting one from scratch.
6. Safety Is Guaranteed
According to the Global Peace Index, Spain is the 6th safest country in the world.
Safety is an important consideration for businesses. A safe country is a good place to do business because it reduces the risk of crime and violence. Once you set up a company in Spain, you can feel confident that your business and your employees will be safe.
7. Spain Is a Gateway to Europe
Spain is an ideal location for businesses that want to expand into other European markets. That’s because Spain is a member of the European Union (EU) and the eurozone. As a member of the EU, Spain enjoys free trade with other member states. The country also uses the euro as its currency.
What’s more, Spain offers a number of preferential trade agreements with countries outside of the EU. These agreements make it easier for businesses to export goods and services to these countries.
In addition, Spain is home to a number of major ports, including the Port of Barcelona and the Port of Valencia. These ports provide businesses with access to the European market.
8. Tech and Innovation Are on the Rise
Spain is quickly becoming a hub for tech and innovation. The country is home to a number of world-class research facilities, including the Barcelona Supercomputing Center and the Spanish National Research Council.
Why is this beneficial for businesses? Well, research facilities are a source of new ideas and technologies. They help businesses to stay at the forefront of innovation.
In addition, Spain is home to a number of startup accelerator programs. These programs help startups to get off the ground by providing them with funding, mentorship, and access to resources.
Who May Establish a Business in Spain?
Spain is generally welcoming to businesses and offers a number of incentives for foreign investment. Any EU citizen or company is allowed to set up a business in Spain, and there are few restrictions on the type of business that can be established.
Non-EU citizens may also set up a business in Spain, so you don’t need to worry about obtaining Spanish citizenship to do so. However, there are a few additional requirements. In order to own a company in Spain, you must first obtain a visa and then obtain a work permit. They must also demonstrate that they have the necessary financial resources to establish and maintain their business. Once these requirements have been met, non-EU citizens are free to start a new company in Spain.
Which Company Type Should You Pick?
Once you decide to launch a business in Spain, you’ll realize that you have plenty of different business types to choose from. Every business is different, and the type of company you choose should be based on your specific needs and goals. Here are some of the top company types in Spain:
1. Sole Proprietorship
This is the simplest and most common type of company in Spain. It’s easy to set up and usually only requires one person. The downside is that you, as the owner, are personally liable for all debts and obligations of the business.
As a sole trader in Spain, you’ll be required to pay income tax. However, you may be eligible for certain tax breaks, such as the small business deduction.
2. Limited Liability Company (LLC)
An LLC is a type of company that offers limited liability to its owners. This means that the owners are not personally liable for the debts and obligations of the business.
An LLC in Spain must have at least two members, and it must be registered with the Spanish Trade Register. The minimum share capital for an LLC is 3,000 euros.
3. Company Branch Office
You may also be expanding an existing business by opening a branch office in Spain. A branch office is simply an extension of your existing company. You’ll still be liable for the debts and obligations of the business, but you won’t have to go through the process of setting up a new company.
To set up a branch office, you’ll need to register with the Spanish Trade Register and have a valid business license. You’ll also need to appoint a legal representative in Spain.
4. Stock Corporation
A stock corporation, or publicly traded company, is a type of company that is owned by shareholders. The shareholders elect a board of directors to manage the company.
In Spain, a stock corporation must have at least five shareholders and a minimum share capital of 60,000 euros. The company must also be registered with the Spanish Trade Register.
The 7 Steps to Starting a Business in Spain
Now that you know which type of business you want to set up, it’s time to start the process. There are reliable professionals, such as AvaLanding, who specialize in helping entrepreneurs set up businesses in Spain. Partnering with them can help make this process as smooth as possible for you.
Depending on the type of business you choose, the steps may vary slightly. However, there are some general steps to set up a business in Spain that all foreign entrepreneurs must follow. Let’s take a close look at each.
Step 1: Obtain a Tax Identification Number (NIE)
All foreign citizens who wish to own a business in Spain must obtain an NIE. This is a tax identification number that all Spanish businesses are required to have. You can apply for an NIE at your local police station or Spanish consulate.
To apply for an NIE, you’ll need to fill out an application form and submit it, along with your passport or some other form of identification. Once your application is processed, you’ll be given an NIE number.
Step 1: Obtain a Tax Identification Number (NIE)
All foreign citizens who wish to own a business in Spain must obtain an NIE. This is a tax identification number that all Spanish businesses are required to have. You can apply for an NIE at your local police station or Spanish consulate.
To apply for an NIE, you’ll need to fill out an application form and submit it, along with your passport or some other form of identification. Once your application is processed, you’ll be given an NIE number.
Step 2: Register Your Company Name
Before you can start a Spanish business, you must register your company name with the RMC. The Mercantile Registry is a government body that keeps track of all businesses in Spain.
The registration process is simple. You’ll need to submit an application form, along with your company name, business address, and NIE number. Once your application is approved, you’ll be given a registration number.
Step 3: Apply for a Company Tax Identification Number (CIF)
All businesses in Spain are required to have a CIF. This is a tax identification number that is used for tax purposes. You can apply for a CIF at your local tax office. Note that you’ll need to have your NIE number before you can apply for a CIF.
To apply for a CIF, you’ll need to fill out an application form and submit it, along with your company name and NIE number. Once your application is processed, you’ll be given a CIF number.
Step 4: Open a Company Bank Account
A business bank account is necessary to start operating a company in Spain. Most banks will require that you have your NIE and CIF numbers before they will open an account for you.
When opening a business bank account, you’ll need to provide the bank with your company name, business address, and tax information. You may also be required to deposit a minimum amount of money into the account.
Step 5: Sign the Deed of Incorporation
Now that you have your business bank account set up, it’s time to sign the deed of incorporation. This is a legal document that officially establishes your company.
Go to a notary public and provide them with your company name, business address, and tax information. You’ll also need to provide the names and addresses of your shareholders. The notary public will then prepare the deed of incorporation for you to sign.
Step 6: Register Your Company
Sure, you registered the company name, but the business isn’t official until it’s registered. This is still done with the Mercantile Registry.
To register a company in Spain, you’ll need to submit a number of documents, including the deed of incorporation, articles of association, and shareholders’ agreement. You’ll also need to provide the names and addresses of your shareholders, directors, and officers. The registration process can take several weeks to complete.
Step 7: Register With the Social Security System
The final step in setting up your business is to register with the Social Security system. This is necessary in order to comply with Spanish employment law. In this step, you’ll need many of the same documents that you used to register your company, including the deed of incorporation, articles of association, and shareholders’ agreement.
You’ll also need to provide the names and addresses of your employees, as well as their job titles and salaries. Once you’ve registered with the Social Security system, you’ll be given a registration number.
Tips for Running Your Business in Spain
Now that you own a company in Spain, it’s time to start running it. Here are a few tips to help you get started.
1. Hire a Good Accountant
This is especially important if you’re not familiar with Spanish tax law. A good accountant will help you stay compliant with the law and minimize your tax liability.
2. Get Familiar With Spanish Employment Law
As an employer, you’re required to comply with a number of laws, including those relating to minimum wage, vacation time, and health and safety. It’s important that you understand these laws so that you can comply with them.
You’ll also need to provide the names and addresses of your employees, as well as their job titles and salaries. Once you’ve registered with the Social Security system, you’ll be given a registration number.
3. Learn Some Spanish
While you don’t need to be fluent in Spanish to do business in the country, it will help if you know some basic phrases. This will make it easier to communicate with your employees, customers, and suppliers.
4. Build Relationships
In Spain, business is often done on a personal level. This means that it’s important to build relationships with your employees, customers, and suppliers. The better the relationships you have, the more successful your business is likely to be.
Start Your Journey to Owning a Spanish Business
With its stable economy and favourable tax regime, Spain remains one of the best countries in the world to do business. Entrepreneurs who choose this destination also find that the process of setting up a company is relatively simple. By following the steps outlined above, you can be well on your way to starting your own business in Spain.
Would you like expert help in setting up your business in Spain? Our team can help you with everything needed to get your company up and running in Spain. Contact us today to learn more about how we can help.
